Jonathan Wellum: Canada vs. U.S. Stocks: Where Investors Should Put Their Money
Summary
Market Size and Liquidity: The US stock market is significantly larger and more liquid than the Canadian market, with a market cap of approximately $50 trillion compared to Canada's $2.5 trillion, offering more investment opportunities.
Sector Differences: The Canadian market is heavily concentrated in resources, with energy and materials comprising over 30% of the Toronto Stock Exchange, while the US market is more diversified, particularly strong in technology.
Technology and Innovation: The US leads in technology and innovation, with major companies like Microsoft and Apple, making it a critical market for Canadian investors seeking exposure to tech growth.
Currency and Foreign Exchange: Currency fluctuations can significantly impact investment returns, with the Canadian dollar historically experiencing large swings against the US dollar, necessitating careful consideration of foreign exchange risks.
Tax Implications: Cross-border investments between Canada and the US are generally facilitated by favorable tax treaties, with a typical 15% withholding tax on dividends, making it easier for investors to navigate tax obligations.
Investment Strategy: As a value investor, Jonathan Wellum emphasizes comparing Canadian companies against US counterparts, focusing on valuations and opportunities, with a current allocation of approximately 60-65% in US equities.
Performance and Returns: Historically, the US market has outperformed the Canadian market due to its tech sector and diversified economy, while Canada's resource-heavy market tends to be more cyclical and capital-intensive.
Transcript
If you look at the market cap of the US uh US markets, it's you know something like $50 trillion compared to uh Canada at about $2.5 trillion. So those are massive differences. And so you think about the opportunities uh the opportunity set in the United States at the moment. Jonathan, thank you very much for joining us today. You and your team are based in Canada, but you invest in both Canadian and US stocks. And I thought it would be a good idea to sit down with you and spend some time discussing the differences between investing in Canadian stocks versus US stocks and what the different elements are when it comes into making a investment decision. And I always like to begin with a topdown view. So I want to first touch on the Canadian economy versus the US economy and the differences between the two and how these differences come into the decision-making process. Yes. Um well from from our from our perspective uh as Canadians uh it you know when you're next to the largest most dynamic economy in the world you're constantly looking south. for Americans who are find themselves in the world's you know largest most dynamic economy in the world they looking up to Canada often um you know don't spend much time looking at Canada but from from a Canadian perspective we spend much more time in the United States market uh than even the Canadian market and that's largely because the US market is probably 15 18 times larger than the Canadian market so if you look at the market cap of the US uh US markets it's you know something like $50 trillion compared to Canada at about $2.5 trillion dollars. So those are massive differences and so when you think about just the market size uh it's just uh such a large difference and so you think about the opportunities uh the opportunity set in the United States is going to be much larger and then when you think of liquidity I mean the liquidity in the United States again is multiples multiples uh better liquidity than than in Canada u and then when you start to bear down we'll talk about this there's much difference uh in terms of sectors and sector weights are quite different between the United States and Canada because Canada Canada still remains quite a resourcefocused economy and so there's a couple large sectors in Canada that really dominate the you know the Toronto stock market the TSX as they call it and uh and so you're it's much more focused and much more concentrated in Canada. So yeah we as in Canadian investors we look a lot to the US and have big investments in the US and we love some of our Canadian companies too and certainly encourage our American the American viewers here on Wealthon to come north. Uh we've got some great businesses uh in some of the resource sectors and uh and of course they know some of our great business like Constellation Software, Shopify, those are a couple big names that are Canadian names that uh are fairly large in the states also. And you did touch on the fact that Canada is a resourcerich nation and a large part of our GDP I believe it's around 30% is um export driven. So we're an exportdriven economy, but maybe you can just speak to the resources, the importance of the resources to this economy and how that's different from the US. Yeah, when you look at the say if you look at the uh the S&P TSX, which is our big Toronto stock market uh in uh in Toronto, about 17 18% of that market is energy. And then you've got another 13% or so would be materials. And that's everything from uh you know pot ash to uh to gold, silver, precious metals and so forth. So you've got over 30% of our Toronto market just in energy and in materials alone. Um and that's a large large waiting versus the US where uh those those sectors would be much much smaller. So when you think of just the importance on our Toronto market uh those are huge sectors. The other big one that Americans uh uh you know you know should know about would be of course our financial sector. So we have these, you know, massive banks in Canada and they take up about 31 32% of the TSX. So between the materials, energy and financials, you're talking uh well over uh you know, you're getting close to twothirds of our market. Um so that's that's the kind of concentration you get whereas in the and you think about healthcare, for example, we have about 4% of our market in healthcare point4 less than 1%. Um in the US it's like 11%. Um and so there's and you know materials in the US uh S&P is only you know less than 2% and ours as they say is is like 13%. So yeah so there's big differences in sectors. Canada is a resourcerrich country. Large reserves in uranium, oil, gas, pot, ash, copper, gold, silver, all of these resources, timber, um hydroelectric energy, a big energy producer also. And uh those are really dominant areas, much smaller in manufacturing. Our industrial base, although we've got some good industrial companies, is just a fraction of what you'd see in the United States. Also, as part of our silver interview series this month, we're bringing you top tier research in a free silver investment report. To claim your free silver investing report, simply click on the link in the description below. And if you're looking for a simple, secure way to invest in physical gold and silver, check out Hard Assets Alliance at hard assets.com. Speaking of silver, Wealthon will be on the ground at the SCP resource finance global silver conference this October in Toronto where Eric Sprat will deliver the keynote address. It's going to be a major event for silver investors. So stay tuned for more details in the weeks ahead. And one of the big advantages of the US market is its u technology and innovation like no other country in the world comes close to the the US and what they've achieved with some of these companies like Microsoft or Apple or Meta or Nvidia. But uh maybe you can just speak to that and the importance of of the tech sector in the US and why you as a Canadian investor has to be there. Yeah, I mean interestingly enough um I mean Canada uh does originate tech companies uh and we've been known for that in the Ottawa area also the waterlue area waterl is known by a lot of Americans University of Waterlue and uh that's where RIM uh research in motion came out of and so on but it doesn't take long for those companies if you've got really bright people coming up with these ideas they're they they either gravitate to the states where the capital is or they get bought out pretty soon and so yeah What happens is it's very difficult to compete against the United States uh in terms of technology and those industries which you know require capital they require you know very dynamic individuals private uh private equity venture capital angel investors and in Canada yeah we have some of that but again it it lags so far behind the US and so what's happened is the US has become by far the dominant player in technology and as we know it's technological improvements now we've got AI um that's really driving a lot of the markets driving productivity gains and so that's a very very small sector in Canada and what you find that even if we have Canadian-based companies like Constellation Software and so forth I mean most of their acquisitions of course are in the United States so they might be Canadianbased but they're large large players in the United States and the same thing with Shopify so yeah we're just a very small market and I think the US this is really a ma major advantage for the US visa v Canada and Europe and the rest of the world and that's their technology sector. Um it is an amazing sector and uh it's very hard to compete against them. I think um again going forward uh they're keeping the cost of capital down. Um the current Trump administration is encouraging more technological innovation, less regulations and that's just going to feed that sector even more I think in the United States. And so that's a good overview of the economy and why and the difference between the two economies. But you touched on this earlier and I want to talk about the u the actual stock markets. Now it doesn't matter if it's the S&P or the the New York Stock Exchange, the Toronto Stock Exchange. One of the big advantages that the US has Canada does not has is the size and the liquidity. And this is why individuals like you money professional money managers, you got to go to the US for that size and liquidity. and you touched on this the the market cap of uh all the stocks in the US it's around $50 trillion versus 4 five versus 4.5 trillion for the Canadian uh stock market. So it's significantly smaller and I mean there's some companies in the US that have market caps larger than the all the stocks on the Toronto Stock Exchange but maybe you can just talk about that and the importance of having this liquidity. Yeah, I think that 4.5 trillion is actually a Canadian dollar number. So if you uh if you actually divide that by 1.36, you get down even smaller. Yeah. And so the in the US market is just so deep and uh and and liquid. And what's also interesting is many of our Canadian companies if they want to get uh more liquidity, they will then uh interlist. So they might be listed in Toronto, but they'll also list um um in the United States. And that's what we see happening. So a lot of times we can buy our Canadianbased companies that are doing a lot of business around the world including the US. We'll buy them in the United States in US dollars. Um and that's uh that that's just the reality given the size difference. So um and the US market as we know uh on a valuation basis in terms of its the total value of the stocks traded and the equity markets uh dwarfs every other market in the world and so Canada is no exception there. And uh again I don't see that changing anytime soon. So something else I want to discuss uh this is very important when you invest in different countries and if you're a Canadian investor and you invest in the US or Europe or it doesn't matter where you got to be very concerned about the foreign exchange. So I'm just going to throw out some rough numbers. If I'm a Canadian investor and I have my money in the S&P and the S&P is up 10% on the year but the Canadian dollar is up 10% versus the USD that means my money is more or less flat. Okay. And of course, if the Canadian dollar keeps going up against the US dollar, it can cost me a lot of performance. So maybe you can just speak to the importance of currency and foreign exchange. Yeah, this is this is a big issue for um for investors in different markets, the currency move. So in Canada, uh we generally uh don't worry too much if we're investing in the US because it's, you know, you got the dollar, the reserve currency, and so forth, but it will swing your rates around dramatically. So, if you're in the US and you're buying uh into Canada, then you you know, in some cases, you'll hedge that risk because you're concerned about the currency risk. The Canadian dollar can move around a lot. And so, just a couple of examples, that's that's because it's seen as a resource currency. And so, you know, if you if it's a commodity type currency and you're going into a recession, then typically they'll sell down the dollar. But if you think about this since in the last you know 20 30 years our dollar has gone all the way down to uh at as low 6162 cents back in the 1990s to the US dollar up to a$156 above the US dollar several times going back in the last 15 16 years and so those are major major swings that you have to factor in uh to your analysis when you're looking at the marketplace. So, if you're going in and the Canadian dollar is really quite low, again, assuming there'll be some rational policies back in Canada, our dollar could rise quite a bit. And yeah, you would uh that would be a good opportunity for American investors if our dollar is going up on the conversely, if things are rip roaring and our dollar is quite high and you're investing in our resource sector expecting to get some great returns. Um, and then we go into a slowdown, you could see our dollar drop quite a bit. So these swings, you can get 30 40% swings literally in currency between Canada and the United States. And so that's something that investors need to be aware of. But there's ways that they can hedge that if that's a concern. We typically look at buying companies that make money all around the world. And typically um what happens is the currency changes get embedded in the stock prices and uh it tends to sort of wash out over extended periods of time. But uh if you're a short-term investor, currency moves are going to be very important to you. Absolutely important. And in addition to being aware of what's happening with the currency, you also got to be aware of tax implications of both Canada and the US. Maybe you can touch on that. Yeah, I mean right now we have reasonably uh sane tax policies in terms of owning each other's stocks. So there's a 15% generally a 15% withholding on on dividends and that's something that's worked out with our tax treaties. So if you're buying Canadian stocks, it's not going to be too uh injurious to Americans and vice versa if Canadians are buying US stocks. So there's that withholding um uh tax uh which is relatively small on dividends. And so that's something that uh has been a a good policy. It's made it easier easy to crossber shop when it comes to buying securities. There was in that big beautiful bill that Trump had uh uh before us, there was some talk about uh increasing the taxation um on on uh on US investments that was dropped thankfully. Um so that's good. The other factor would just be capital gains taxes. People should be aware of that. But that would Americans will have their own set of capital gains taxes. We have our own set here. Um and generally ours are, you know, 50% of the capital gains taxed at your uh at your marginal tax rate. in the US as they know it varies based upon time horizon, how long you've owned the security and then your tax bracket. So the tax policies at this point if you're buying each other's stocks if no Canadians are buying US and US are buying Canadians are generally pretty uh pretty smooth and pretty clean uh because of tax treaties between the countries which is nice. If you have any questions about how to navigate the current environment, Wealthon can help connect you with a vetted advisor to get a free portfolio review. Just click the link in the description below or head to wealthon.com/free. There's no obligation and it will just take a few minutes of your time. Again, that's wealthon.comfree. Let's discuss the performance and the historical returns of both markets. And we touched on this earlier, but one of the big advantages of the US is is this tech industry. It's just a machine in terms of uh creating cash flow and valuations. But can you discuss or provide us some context as to can you provide some context as to what's been happening with both markets in the last 10 or 20 years? Yeah. And now if you think about the Canadian market, what we've said is it's much more resourcefocused and resources and commodities really are much more cyclical and so it makes sense over and and have lower cower returns overall generally speaking again through the whole business cycle because they're capital intense and there's more risk when you're digging holes and trying to find resources and so on and getting a return on it. It's it's riskier. So it it makes it only follows that on the Toronto market our returns are generally three to four percent if not sometimes more less on an annual compound rate of return. So you know the TSX over the last number of years has been growing at 78 you know six 7% um maybe slightly higher um versus the S&P which has been double digit low double digits. So there's significant change in performance but again uh investors would understand that's because our sectors are so much different. we don't have those high-powered tech companies uh even some you know biotech companies um manufacturing industrial companies in the US some of them are very dynamic and uh integrating technology into their businesses we just don't have the depth and breadth in Canada of those kind of companies where you get you know these high high returns on invested capital that you can see in some industrials and some manufacturers the tech businesses um our business are much more capital intense and overall now our banks have done quite well um and So they skew up the numbers on the TSX. If you were to pull the banks out, it would probably be even more abysmal um in terms of our return. So yeah, the returns are substantially different. And again, that's why a lot of investors in the states, Americans say, well, why bother going to Canada? We can basically get our exposure to what we want here in the United States. And I would say that's largely true, but we also have uh we have some gems up in Canada and uh and some interesting valuations where you can buy equally, you know, some some great quality companies at um lower multiples and still with good growth rates. So don't don't neglect Canada. Um and even though you're hearing sometimes bad headlines about the country uh and some of the direction, that doesn't mean some of the businesses that can't do well and aren't doing well. And so encourage people to, you know, to search, to look, to far it out opportunities, especially in our energy patch. Some of our great resource companies, uh, they're doing quite well and making lots of money. So Jonathan, before we wrap up, I want you to summarize a lot of the points you made. Um, because from an investment point of view, so you deal with Canadian clients and having said everything that we've just discussed, how does this all come into play as a value investor, how do you allocate money between Canada versus the US? Yeah, it's a great it's a great question. Um, we we know the Canadian market well and so what we try to do is fair it out what we believe are some of the best companies trading at attractive valuations in Canada and and then put them up against our American counterparts. And so we we want to we don't want to be buying companies that are second rate um just because they're Canadian companies, but we put them up against our Canadian our US counterparts. And so u and then we compare them. We compare the valuations. So some of our Canadian companies if you think about uh the leading royalty companies in the um in the uh gold silver space like wheat and precious metals Franco Nevada those are Canadian companies um Sandstorm used you know is but uh they're being bought out by royal golds that's going south of the border that's that's what's happening to more and more of our companies. If you think of Kamico and you want to get exposure to nuclear I mean Kamico is one of the best companies in the world in terms of supplies of uranium and decades and decades of uranium. So, we'll look at the different industries and we'll just put our Canadian companies up and say if they can stack up against the US and compete against them, then we're going to buy the Canadian companies all day long. And we do have some great companies. The Brookfield companies have been great companies, leaders, um, in terms of their business. And so, um, yeah, uh, as I mentioned, we don't own Shopify, but Shopify has been interesting business. Constellation Softwares have been a bangup business uh for I mean it's been one of the best performing companies on the TSX I think in the last 20 years by far. Um it's been extraordinary. So we'll look at the Canadian companies and uh line them up and then buy them based upon valuations and opportunities. Um same thing with the oil and gas sector but we'll try not to overlook the Canadian companies. We will screen through them all because uh in in our view they're probably trading at better valuations because they're not picked up in all these big indexes where all the passive money is just flowing in and you know picking up these companies. So we can find some overlooked underloved companies in Canada and if they can compare we'll buy them. Otherwise we buy the US leader. And typically what percent of your overall assets would be invested in the US versus Canada? Yeah, currently we would have of our equities we'd probably have about 60 65% would be US centric companies. Um, and then uh the rest would be largely Canadian and uh a couple European companies. So yeah, it's it's it's hard to avoid the US. Um, but uh it is a it is an incredible market and I think it'll it's going to continue to be a world leader just simply because of the the dynamism in that country and uh tax policies and incentives uh there. So that's really the way the ratio breaks out. But that's breaks out based upon quality and valuation of the companies that we find. Well, Jonathan, this has been a great discussion and I want to thank you very much for spending time with us today and sharing your thoughts on how you make a investment decision between investing in Canada versus the US. If somebody would like to learn more about you and your firm, Rocklink Investment Partners, where can they go? Sure. Our website uh is the easiest way to track us down. So that's just rocklink.com. R O C K L I N C Rocklink with a C and info atrocklink.com will uh will will track us down and uh and so we'd love to hear from you and anyway we can work with different Canadian investors. We'd love to do that. Come by, we'll give you a free free assessment uh and uh and tell you how uh how we would approach the investment process with you. Jonathan, once again, thank you. Thank you very much, Jimmy. [Music]
Jonathan Wellum: Canada vs. U.S. Stocks: Where Investors Should Put Their Money
Summary
Transcript
If you look at the market cap of the US uh US markets, it's you know something like $50 trillion compared to uh Canada at about $2.5 trillion. So those are massive differences. And so you think about the opportunities uh the opportunity set in the United States at the moment. Jonathan, thank you very much for joining us today. You and your team are based in Canada, but you invest in both Canadian and US stocks. And I thought it would be a good idea to sit down with you and spend some time discussing the differences between investing in Canadian stocks versus US stocks and what the different elements are when it comes into making a investment decision. And I always like to begin with a topdown view. So I want to first touch on the Canadian economy versus the US economy and the differences between the two and how these differences come into the decision-making process. Yes. Um well from from our from our perspective uh as Canadians uh it you know when you're next to the largest most dynamic economy in the world you're constantly looking south. for Americans who are find themselves in the world's you know largest most dynamic economy in the world they looking up to Canada often um you know don't spend much time looking at Canada but from from a Canadian perspective we spend much more time in the United States market uh than even the Canadian market and that's largely because the US market is probably 15 18 times larger than the Canadian market so if you look at the market cap of the US uh US markets it's you know something like $50 trillion compared to Canada at about $2.5 trillion dollars. So those are massive differences and so when you think about just the market size uh it's just uh such a large difference and so you think about the opportunities uh the opportunity set in the United States is going to be much larger and then when you think of liquidity I mean the liquidity in the United States again is multiples multiples uh better liquidity than than in Canada u and then when you start to bear down we'll talk about this there's much difference uh in terms of sectors and sector weights are quite different between the United States and Canada because Canada Canada still remains quite a resourcefocused economy and so there's a couple large sectors in Canada that really dominate the you know the Toronto stock market the TSX as they call it and uh and so you're it's much more focused and much more concentrated in Canada. So yeah we as in Canadian investors we look a lot to the US and have big investments in the US and we love some of our Canadian companies too and certainly encourage our American the American viewers here on Wealthon to come north. Uh we've got some great businesses uh in some of the resource sectors and uh and of course they know some of our great business like Constellation Software, Shopify, those are a couple big names that are Canadian names that uh are fairly large in the states also. And you did touch on the fact that Canada is a resourcerich nation and a large part of our GDP I believe it's around 30% is um export driven. So we're an exportdriven economy, but maybe you can just speak to the resources, the importance of the resources to this economy and how that's different from the US. Yeah, when you look at the say if you look at the uh the S&P TSX, which is our big Toronto stock market uh in uh in Toronto, about 17 18% of that market is energy. And then you've got another 13% or so would be materials. And that's everything from uh you know pot ash to uh to gold, silver, precious metals and so forth. So you've got over 30% of our Toronto market just in energy and in materials alone. Um and that's a large large waiting versus the US where uh those those sectors would be much much smaller. So when you think of just the importance on our Toronto market uh those are huge sectors. The other big one that Americans uh uh you know you know should know about would be of course our financial sector. So we have these, you know, massive banks in Canada and they take up about 31 32% of the TSX. So between the materials, energy and financials, you're talking uh well over uh you know, you're getting close to twothirds of our market. Um so that's that's the kind of concentration you get whereas in the and you think about healthcare, for example, we have about 4% of our market in healthcare point4 less than 1%. Um in the US it's like 11%. Um and so there's and you know materials in the US uh S&P is only you know less than 2% and ours as they say is is like 13%. So yeah so there's big differences in sectors. Canada is a resourcerrich country. Large reserves in uranium, oil, gas, pot, ash, copper, gold, silver, all of these resources, timber, um hydroelectric energy, a big energy producer also. And uh those are really dominant areas, much smaller in manufacturing. Our industrial base, although we've got some good industrial companies, is just a fraction of what you'd see in the United States. Also, as part of our silver interview series this month, we're bringing you top tier research in a free silver investment report. To claim your free silver investing report, simply click on the link in the description below. And if you're looking for a simple, secure way to invest in physical gold and silver, check out Hard Assets Alliance at hard assets.com. Speaking of silver, Wealthon will be on the ground at the SCP resource finance global silver conference this October in Toronto where Eric Sprat will deliver the keynote address. It's going to be a major event for silver investors. So stay tuned for more details in the weeks ahead. And one of the big advantages of the US market is its u technology and innovation like no other country in the world comes close to the the US and what they've achieved with some of these companies like Microsoft or Apple or Meta or Nvidia. But uh maybe you can just speak to that and the importance of of the tech sector in the US and why you as a Canadian investor has to be there. Yeah, I mean interestingly enough um I mean Canada uh does originate tech companies uh and we've been known for that in the Ottawa area also the waterlue area waterl is known by a lot of Americans University of Waterlue and uh that's where RIM uh research in motion came out of and so on but it doesn't take long for those companies if you've got really bright people coming up with these ideas they're they they either gravitate to the states where the capital is or they get bought out pretty soon and so yeah What happens is it's very difficult to compete against the United States uh in terms of technology and those industries which you know require capital they require you know very dynamic individuals private uh private equity venture capital angel investors and in Canada yeah we have some of that but again it it lags so far behind the US and so what's happened is the US has become by far the dominant player in technology and as we know it's technological improvements now we've got AI um that's really driving a lot of the markets driving productivity gains and so that's a very very small sector in Canada and what you find that even if we have Canadian-based companies like Constellation Software and so forth I mean most of their acquisitions of course are in the United States so they might be Canadianbased but they're large large players in the United States and the same thing with Shopify so yeah we're just a very small market and I think the US this is really a ma major advantage for the US visa v Canada and Europe and the rest of the world and that's their technology sector. Um it is an amazing sector and uh it's very hard to compete against them. I think um again going forward uh they're keeping the cost of capital down. Um the current Trump administration is encouraging more technological innovation, less regulations and that's just going to feed that sector even more I think in the United States. And so that's a good overview of the economy and why and the difference between the two economies. But you touched on this earlier and I want to talk about the u the actual stock markets. Now it doesn't matter if it's the S&P or the the New York Stock Exchange, the Toronto Stock Exchange. One of the big advantages that the US has Canada does not has is the size and the liquidity. And this is why individuals like you money professional money managers, you got to go to the US for that size and liquidity. and you touched on this the the market cap of uh all the stocks in the US it's around $50 trillion versus 4 five versus 4.5 trillion for the Canadian uh stock market. So it's significantly smaller and I mean there's some companies in the US that have market caps larger than the all the stocks on the Toronto Stock Exchange but maybe you can just talk about that and the importance of having this liquidity. Yeah, I think that 4.5 trillion is actually a Canadian dollar number. So if you uh if you actually divide that by 1.36, you get down even smaller. Yeah. And so the in the US market is just so deep and uh and and liquid. And what's also interesting is many of our Canadian companies if they want to get uh more liquidity, they will then uh interlist. So they might be listed in Toronto, but they'll also list um um in the United States. And that's what we see happening. So a lot of times we can buy our Canadianbased companies that are doing a lot of business around the world including the US. We'll buy them in the United States in US dollars. Um and that's uh that that's just the reality given the size difference. So um and the US market as we know uh on a valuation basis in terms of its the total value of the stocks traded and the equity markets uh dwarfs every other market in the world and so Canada is no exception there. And uh again I don't see that changing anytime soon. So something else I want to discuss uh this is very important when you invest in different countries and if you're a Canadian investor and you invest in the US or Europe or it doesn't matter where you got to be very concerned about the foreign exchange. So I'm just going to throw out some rough numbers. If I'm a Canadian investor and I have my money in the S&P and the S&P is up 10% on the year but the Canadian dollar is up 10% versus the USD that means my money is more or less flat. Okay. And of course, if the Canadian dollar keeps going up against the US dollar, it can cost me a lot of performance. So maybe you can just speak to the importance of currency and foreign exchange. Yeah, this is this is a big issue for um for investors in different markets, the currency move. So in Canada, uh we generally uh don't worry too much if we're investing in the US because it's, you know, you got the dollar, the reserve currency, and so forth, but it will swing your rates around dramatically. So, if you're in the US and you're buying uh into Canada, then you you know, in some cases, you'll hedge that risk because you're concerned about the currency risk. The Canadian dollar can move around a lot. And so, just a couple of examples, that's that's because it's seen as a resource currency. And so, you know, if you if it's a commodity type currency and you're going into a recession, then typically they'll sell down the dollar. But if you think about this since in the last you know 20 30 years our dollar has gone all the way down to uh at as low 6162 cents back in the 1990s to the US dollar up to a$156 above the US dollar several times going back in the last 15 16 years and so those are major major swings that you have to factor in uh to your analysis when you're looking at the marketplace. So, if you're going in and the Canadian dollar is really quite low, again, assuming there'll be some rational policies back in Canada, our dollar could rise quite a bit. And yeah, you would uh that would be a good opportunity for American investors if our dollar is going up on the conversely, if things are rip roaring and our dollar is quite high and you're investing in our resource sector expecting to get some great returns. Um, and then we go into a slowdown, you could see our dollar drop quite a bit. So these swings, you can get 30 40% swings literally in currency between Canada and the United States. And so that's something that investors need to be aware of. But there's ways that they can hedge that if that's a concern. We typically look at buying companies that make money all around the world. And typically um what happens is the currency changes get embedded in the stock prices and uh it tends to sort of wash out over extended periods of time. But uh if you're a short-term investor, currency moves are going to be very important to you. Absolutely important. And in addition to being aware of what's happening with the currency, you also got to be aware of tax implications of both Canada and the US. Maybe you can touch on that. Yeah, I mean right now we have reasonably uh sane tax policies in terms of owning each other's stocks. So there's a 15% generally a 15% withholding on on dividends and that's something that's worked out with our tax treaties. So if you're buying Canadian stocks, it's not going to be too uh injurious to Americans and vice versa if Canadians are buying US stocks. So there's that withholding um uh tax uh which is relatively small on dividends. And so that's something that uh has been a a good policy. It's made it easier easy to crossber shop when it comes to buying securities. There was in that big beautiful bill that Trump had uh uh before us, there was some talk about uh increasing the taxation um on on uh on US investments that was dropped thankfully. Um so that's good. The other factor would just be capital gains taxes. People should be aware of that. But that would Americans will have their own set of capital gains taxes. We have our own set here. Um and generally ours are, you know, 50% of the capital gains taxed at your uh at your marginal tax rate. in the US as they know it varies based upon time horizon, how long you've owned the security and then your tax bracket. So the tax policies at this point if you're buying each other's stocks if no Canadians are buying US and US are buying Canadians are generally pretty uh pretty smooth and pretty clean uh because of tax treaties between the countries which is nice. If you have any questions about how to navigate the current environment, Wealthon can help connect you with a vetted advisor to get a free portfolio review. Just click the link in the description below or head to wealthon.com/free. There's no obligation and it will just take a few minutes of your time. Again, that's wealthon.comfree. Let's discuss the performance and the historical returns of both markets. And we touched on this earlier, but one of the big advantages of the US is is this tech industry. It's just a machine in terms of uh creating cash flow and valuations. But can you discuss or provide us some context as to can you provide some context as to what's been happening with both markets in the last 10 or 20 years? Yeah. And now if you think about the Canadian market, what we've said is it's much more resourcefocused and resources and commodities really are much more cyclical and so it makes sense over and and have lower cower returns overall generally speaking again through the whole business cycle because they're capital intense and there's more risk when you're digging holes and trying to find resources and so on and getting a return on it. It's it's riskier. So it it makes it only follows that on the Toronto market our returns are generally three to four percent if not sometimes more less on an annual compound rate of return. So you know the TSX over the last number of years has been growing at 78 you know six 7% um maybe slightly higher um versus the S&P which has been double digit low double digits. So there's significant change in performance but again uh investors would understand that's because our sectors are so much different. we don't have those high-powered tech companies uh even some you know biotech companies um manufacturing industrial companies in the US some of them are very dynamic and uh integrating technology into their businesses we just don't have the depth and breadth in Canada of those kind of companies where you get you know these high high returns on invested capital that you can see in some industrials and some manufacturers the tech businesses um our business are much more capital intense and overall now our banks have done quite well um and So they skew up the numbers on the TSX. If you were to pull the banks out, it would probably be even more abysmal um in terms of our return. So yeah, the returns are substantially different. And again, that's why a lot of investors in the states, Americans say, well, why bother going to Canada? We can basically get our exposure to what we want here in the United States. And I would say that's largely true, but we also have uh we have some gems up in Canada and uh and some interesting valuations where you can buy equally, you know, some some great quality companies at um lower multiples and still with good growth rates. So don't don't neglect Canada. Um and even though you're hearing sometimes bad headlines about the country uh and some of the direction, that doesn't mean some of the businesses that can't do well and aren't doing well. And so encourage people to, you know, to search, to look, to far it out opportunities, especially in our energy patch. Some of our great resource companies, uh, they're doing quite well and making lots of money. So Jonathan, before we wrap up, I want you to summarize a lot of the points you made. Um, because from an investment point of view, so you deal with Canadian clients and having said everything that we've just discussed, how does this all come into play as a value investor, how do you allocate money between Canada versus the US? Yeah, it's a great it's a great question. Um, we we know the Canadian market well and so what we try to do is fair it out what we believe are some of the best companies trading at attractive valuations in Canada and and then put them up against our American counterparts. And so we we want to we don't want to be buying companies that are second rate um just because they're Canadian companies, but we put them up against our Canadian our US counterparts. And so u and then we compare them. We compare the valuations. So some of our Canadian companies if you think about uh the leading royalty companies in the um in the uh gold silver space like wheat and precious metals Franco Nevada those are Canadian companies um Sandstorm used you know is but uh they're being bought out by royal golds that's going south of the border that's that's what's happening to more and more of our companies. If you think of Kamico and you want to get exposure to nuclear I mean Kamico is one of the best companies in the world in terms of supplies of uranium and decades and decades of uranium. So, we'll look at the different industries and we'll just put our Canadian companies up and say if they can stack up against the US and compete against them, then we're going to buy the Canadian companies all day long. And we do have some great companies. The Brookfield companies have been great companies, leaders, um, in terms of their business. And so, um, yeah, uh, as I mentioned, we don't own Shopify, but Shopify has been interesting business. Constellation Softwares have been a bangup business uh for I mean it's been one of the best performing companies on the TSX I think in the last 20 years by far. Um it's been extraordinary. So we'll look at the Canadian companies and uh line them up and then buy them based upon valuations and opportunities. Um same thing with the oil and gas sector but we'll try not to overlook the Canadian companies. We will screen through them all because uh in in our view they're probably trading at better valuations because they're not picked up in all these big indexes where all the passive money is just flowing in and you know picking up these companies. So we can find some overlooked underloved companies in Canada and if they can compare we'll buy them. Otherwise we buy the US leader. And typically what percent of your overall assets would be invested in the US versus Canada? Yeah, currently we would have of our equities we'd probably have about 60 65% would be US centric companies. Um, and then uh the rest would be largely Canadian and uh a couple European companies. So yeah, it's it's it's hard to avoid the US. Um, but uh it is a it is an incredible market and I think it'll it's going to continue to be a world leader just simply because of the the dynamism in that country and uh tax policies and incentives uh there. So that's really the way the ratio breaks out. But that's breaks out based upon quality and valuation of the companies that we find. Well, Jonathan, this has been a great discussion and I want to thank you very much for spending time with us today and sharing your thoughts on how you make a investment decision between investing in Canada versus the US. If somebody would like to learn more about you and your firm, Rocklink Investment Partners, where can they go? Sure. Our website uh is the easiest way to track us down. So that's just rocklink.com. R O C K L I N C Rocklink with a C and info atrocklink.com will uh will will track us down and uh and so we'd love to hear from you and anyway we can work with different Canadian investors. We'd love to do that. Come by, we'll give you a free free assessment uh and uh and tell you how uh how we would approach the investment process with you. Jonathan, once again, thank you. Thank you very much, Jimmy. [Music]